Although some aspects of the application process (eg, underwriting and insurable interest provisions) make it difficult, life insurance policies have been used to facilitate the exploitation and fraud. In the case of life insurance, there is a possible reason to buy life insurance, especially if the face value is substantial, and then kill the insured. Generally, the higher the demand, and the more serious the incident, the larger and more intense the subsequent investigation, which involves the police and insurance investigators.
The television series Forensic Files has included episodes that feature this scenario. There was also a documented case in 2006, where two elderly women were accused of taking in homeless men and assisting them. As part of their assistance, they took out life insurance for men. After the con testability period ended on the policies, women are alleged to have had the men killed by car accidents hit-and-run.
Recently, viatical have created problems for life insurance providers. A viatical settlement involves the purchase of a life insurance an elderly or terminally ill policy holder. The policy holder sells the policy (including the right to name the beneficiary) to a purchaser for a price discounted from the policy value. The seller has cash in hand, and the purchaser will realize a profit when the seller dies and the proceeds are delivered to the buyer. In the meantime, the purchaser continues to pay the premiums. Although both parties have reached an acceptable agreement, insurers are troubled by this trend. Insurers calculate their rates with the assumption that a certain portion of policy holders will seek to redeem the cash value of your insurance policy before death. They also expect that a certain portion will stop paying premiums and lose their policies. However, viatical settlements ensure that such policies will with absolute certainty be paid. Some purchasers, in order to exploit the potentially large profits, have actively sought, even in collusion with the elderly and the terminally ill without insurance, and created policies that have not otherwise been purchased. These policies are guaranteed losses from the insurers' perspective.